Oil lobbyists focus new attention on regulators

Party change calls for a change in approach

JENNIFER A. DLOUHY, WASHINGTON BUREAU

Published 6:30 am, Monday, March 7, 2011

WASHINGTON — With Congress in friendlier hands, oil and gas lobbyists are shifting more of their attention away from Capitol Hill and to a new arena: the federal agencies developing aggressive regulations that will affect how the industry does business.

That means lobbyists who have focused on Congress for years are trying to adapt and make their arguments to audiences in the executive branch while keeping an eye on Capitol Hill and getting acquainted with more than 100 new House and Senate members.

Even when Democrats controlled both chambers, the industry beat back legislation to force caps on greenhouse gas emissions. Then it faced heightened scrutiny and legislative initiatives prompted by the Gulf of Mexico oil spill - including a proposal to lift or eliminate a 21-year-old cap on spill liability.

Now, with Republicans in control of the House and partisan gridlock limiting chances for major energy legislation, the industry lobby is following the lead of the Democratic administration as it turns to federal agencies in the executive branch that can deploy regulations with fewer congressional restraints.

The Environmental Protection Agency, for example, is pushing for more oversight of hydraulic fracturing - a technology that is opening up vast opportunities for natural gas production but also drawing complaints that it can contaminate water supplies.

And the Interior Department continues to keep a tight grip on its authority over federal lands and waters - most notably restricting Gulf drilling after the oil spill.

More lobbying

"The changing dynamic in Congress has certainly meant that President Obama has to look to other avenues where he has more leverage to move things forward," said Martin Durbin, executive vice president of governmental affairs for the American Petroleum Institute. "We certainly have spent more time this year than last year on the regulatory side."

Trade groups such as Durbin's and Vincent's, along with oil and gas companies, spent $146.3 million on lobbying last year, according to the not-for-profit Center for Responsive Politics and disclosures filed with the Senate. That's a dip from the $175.2 million in 2009, but still roughly double the $74.8 million the industry dedicated to lobbying five years ago.

The five major oil companies make up a big chunk of that - $62.6 million in 2010 - but smaller producers, refiners and trade groups also are spending millions.

With the help of newly empowered Republican allies in the House, the industry hopes to head off some of the new regulatory attention through oversight hearings that aggressively scrutinize the administration's actions.

When Democrats were in charge last year, the House Natural Resources Committee was examining whether to raise royalty rates for oil and gas production from federal leases and create new "use it or lose it" fees on nonproductive leases.

Now the same panel is studying whether the government is stalling permits for offshore drilling and putting more western lands off-limits to oil and gas development.

API to begin donations

The oil industry has "been very aggressive right out of the gate because of the huge opportunity with the election of their allies," said Daniel J. Weiss, the director of climate strategy at the left-leaning Center for American Progress Action Fund.

The changed dynamic was apparent in a free-wheeling, four-day debate last month on a government spending bill. The House passed a series of oil-industry-backed amendments that would limit the EPA's powers to regulate refineries' greenhouse gas emissions and approve new ethanol-gasoline blends.

Still, industry lobbyists say they are just beginning to make inroads with the nearly 100 new lawmakers sworn in to the House in January.

Although the American Petroleum Institute historically hasn't endorsed candidates, it will start donating money to political campaigns this year. Even without API's contributions, the industry donated $3.7 million to candidates in the 2010 congressional election, according to the Center for Responsive Politics.

In its congressional lobbying, the industry aims to educate lawmakers about tax deductions that Obama has targeted for elimination, said Lee Fuller, the Independent Petroleum Association of America's vice president of government relations.

Although Congress has twice rejected the president's request to slash the incentives, lawmakers are planning a broad, multiyear rewrite of the tax code that could put all deductions on the chopping block.

Last week, more than 60 IPAA members flew to Washington from Texas, Louisiana and other states for three days of 100 meetings with lawmakers and their aides.

EPA eyes industry

And this week, API will host American oil and natural gas workers from six states for meetings on Capitol Hill.

"People who come out of the real world and who can tell the real stories about how it really impacts their business" are better able to convey the value of tax incentives or consequences of regulations, Vincent said. "It's that color that often makes a difference with members of Congress."

That tactic is less likely to work with federal regulators such as the EPA, which is heightening its attention to oil and gas matters. Besides its scrutiny of hydraulic fracturing, it's developing new standards for oil refinery emissions. And of special concern to producers, the EPA is establishing methods for tabulating emissions from multiple wells on a single parcel of land - raising the risks that drilling projects will exceed limits.

The industry has a history working with the Interior Department, which manages federal lands and leases. But energy producers don't have a long-standing relationship with the EPA.

"It makes it much more difficult for them to develop a sense that they can trust you and that you can trust them," Fuller said.

The agency rule-making process also is much more constrained than the way legislation comes together on Capitol Hill. That means companies have fewer opportunities to press their priorities with federal agencies.

"There's not as much you can do with the agencies," Vincent said. "That's the challenge."

Trouble out West?

Industry trade groups and companies that have worked with agencies for years are able draw on connections with career staff members who stay put through changing administrations.

The Interior Department has long used American Petroleum Institute standards as a framework for federal regulations. After last year's oil spill, producers and drilling companies met regularly with Interior Department staff about new rules for offshore exploration.

Still, policy-making at federal agencies can be opaque. Fuller said it has gotten harder to get in to see Interior Department officials, and therefore difficult to get an understanding of their thinking.

To make their case to skeptical audiences, oil and gas advocates count on another strategy: finding allies that might get a warmer reception or have closer ties to the executive branch.

"There are times when we are the best messenger for what we are trying to get across, and other times, it's more effective to have a third party deliver the message," Durbin said.

For instance, oil and gas producers are teaming with western ranchers to fight the Interior Department's new "wild lands" policy that allows the government to protect public lands as if they were designated wilderness areas. Energy producers say the policy could be used to block drilling on public lands throughout the West.

The Interior Department insists the policy will ensure America's iconic western lands are protected for future generations.